What is the gross profit? a. $130,000 b. $120,000 c. $230,000 d. $300,000 previous next

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Step-by-step explanation:

The question is not complete but nonetheless, gross profit is easy to calculate. Let us start by the definition of gross profit, to how to calculate gross profit and, calculation of gross profit margin.

GROSS PROFIT: gross profit can be defined as the profit gained after subtracting the costs of making and selling the products. Gross profit is also known as gross margin.

HOW TO CALCULATE GROSS PROFIT: Gross profit can be calculated by subtracting the total revenue from the cost of goods sold. That is, gross profit= total revenue - cost of goods sold.

So, for example; Company A makes women handbags. Assuming the company made $10million in total revenue for the year and cost of goods sold is $5 million. We can use the formula above to find the company's gross profit margin.

Hence, company A's gross profit= total revenue($10,000,000) - cost of goods sold ($5,000,000).

= $5,000,000.

That is, the gross profit for company A= $5,000,000.

GROSS PROFIT MARGIN: This can be calculated using the formula below;

Gross profit margin= (total revenue - cost of goods)/ revenue.

Hence, from the example above;

Gross profit margin= $10,000,000 - $5,000,000) / $10,000,000.

= 50%

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